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Business Review
International FinanceRecurrent Crises Plague
World Monetary System
Part II
..
...,...
September 1971
This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)
International Finance-
Recurrent Crises Plague
World Monetary System
PART II: PROPOSALS FOR REFORM
~he international monetary system
as undergone a number of major
currency crises over the past de~ade-crises that have come with
~creasing frequency and intensity.
he most recent-a speculative att ack on the U.S. dollar carried out
~hrough conversions into German,
r~nch, Dutch, Austrian, and
~WISs currencies-culminated in the
resident's announcement on
~Ugust 15 that the United States
t ad suspended convertibility beWeen the dollar and the price of
rno~etary gold at $35 an ounce.
ThIS action, setting the dollar
afloat in international exchange
Illarkets, intensifies the search for
~ new, and hopefully more viable,
International monetary system.
~he first part of this two-part
ser~es (in the August issue) deScrIbed the international monetary
system that emerged after the
Bretton Woods Conference in 1944
llnd.t~e problems of international
qUIdity, payments adjustment,
and confidence that have plagued
lllOnetary authorities under that
~hstem. This second part describes
e advantages and disadvantages
f the Bretton Woods system and
appraises major proposals for improving the international adjustlllent mechanism.
°
'l'he Bretton Woods system •••
~he agreement reached at Bretton
t oods calls for member nations of
the International Monetary Fund
bO seek adjustment of their
th'lance-of-payments positions
though infrequent changes in
.erwise rigid exchange rates.
hIS system of fixed exchange rates
g1nerally referred to as a system
o adjustable pegs is supported
1
llUsiness Review I September 1971
by three main arguments. One is
that by providing a dependable
basis for international transactions, fixed rates facilitate profitmaximizing computations of banks
and businesses engaged in international trade and finance. With
an established scale of measurement that can be easily translated
from one currency to another, international competition is promoted and world markets are
better integrated. Increased competition and greater integration of
economic systems, in turn, help
stimulate economic growth and
lead to more efficient use of both
capital and labor.
Another is that by allowing
traders in forward markets to work
against known parities, fixed rates
reduce the cost of forward exchange and increase world trade.
Traders in futures often operate
within spread ranges protected by
the intervention of central banks.
But when the parity is believed to
be firm, the very limits set by .
margins for spot-rate fluctuatIOns
tend to limit the range of forward
movements in rates, even without
direct central bank intervention in
the forward market itself. Thus, by
eliminating the cost of protection
against the possibility of adverse
movements in exchange rates, the
fixed exchange system reduces the
cost of future transactions.
The other argument-based on
what some believe to have been the
major accomplishment under the
system founded at Bretton Woodsis that stable exchange rates help
maintain orderly growth in international trade by eliminating competition in the depreciation of
currencies. In the 1930's, many
countries faced with high unemployment devalued their currencies
in an effort to achieve surpluses in
their balances of payments by
stimulating exports. But as a result
of competitive cuts in currency
vfllues, conditions in exchange markets became chaotic, actually
hindering recovery in international
trade.
Elimination of such conditionsnot only competition in currency
devaluations but also a general
lack of dependability in international transactions, especially in
the forward markets-was indeed a
major accomplishment. Some observers contend, however, that recognition of these accomplishments
does not mean such undesirable
conditions could not have been removed under an international
monetary system with more flexibility in exchange rates. There are,
in fact, several important arguments against the Bretton Woods
system.
. •. and one argument against it •••
One of the most important arguments against rigid exchange rates
-as administered-is that they accentuate a conflict between the
domestic and international goals
of stabilization authorities. In the
long run, for a country to maintain
the value of its currency at an
established exchange rate, it must
maintain equilibrium in its balance
of payments. But the monetary
and fiscal policies needed to restore
equilibrium can conflict with the
continuing domestic objectives of
full employment, relative price stability, and economic growth.
I t can be hard for a country
with, for ("xample, high unemploymnnt and a payments deficit, or
inflation and a surplus, to achieve
1
Speculative flows contribute
to rise in value of German mark
U.S. DOLLAR
(AVERAGE DAILY RATES)
.29-------------------------------------------------.28.27-.26--
.25-=--_--.--1969
1970
1971
SOURCE : Board of Governors, Federal Reserve System
both domestic and foreign goals.
Policies to eliminate a balance-ofpayments deficit by reducing
spending tend to increase unemployment. Similarly, policies to
eliminate a payments surplus by
stimulating spending tend to increase inflation.
With exchange rates fixed, a
country pursuing aggregative domestic policies must depend on
special controls for international
goals. The result is a conflict between three goals, all of which are
considered desirable by advocates
of the Bretton Woods system• Freedom for each country to
pursue monetary and fiscal policy
for the achievement of high employment and stable prices
• Freedom of international
trade from special controls adopted
to achieve equilibrium in the balance of payments
• Fixed exchange rates
While it is fairly easy to achieve
any two of these goals, it is extremely difficult to achieve all three
at the same time. With controls
ruled out, a country can maintain
a rigid exchange rate only by allowing its monetary and fiscal independence-and, hence, its domestic
economic conditions-to be influenced to a great extent by foreign
developments.
2
The conflict between these goals
has been illustrated in the case of
the United States. Unwilling to direct monetary and fiscal policy primarily in terms of international
goals, the U.S. Government has
adopted several special controls, all
of which impact on economic efficiency because they interfere with
the free flow of trade and capital.
These include controls on direct
and portfolio investment abroad,
the interest equalization tax, preferential Government procurement
(especially for the military), and
foreign aid tied to domestic sources
of procurement.
..• and another •..
Another argument against the
Bretton Woods system is that the
adjustable peg system can lead to
large-scale, destabilizing flows of
speculative capital. When a currency comes under severe and continuing exchange pressure, dealers
in foreign exchange are well aware
of the type adjustment likely to be
made. While there may be some
doubt about whether the government will adjust the rate and to
what extent, there is little doubt
about the direction of any possible
change. And as a result, speculators seem to have an almost sure
thing-a one-way option. For an
overvalued currency, the possibilities are simply devaluation or no
change. Devaluation gives a speculator an easy profit. Since speculative funds are usually held in
short-term liquid assets, no change
lets a speculator break even, except
possibly for the commission costs
of the transaction and any interest
income he may have lost because
short-term interest rates were
lower in the country where he
transferred his funds.
Critics have also pointed out
another source of encouragement
to speculation under the Bretton
Woods system. Speculators op~rat
ing under this system do not bld
the rate up against themselves
when they buy a currency. Nor do
they bid the rate down against
themselves when they sell. Under a
system of pegged rates, authorities,
in effect, subsidize speculation by
holding the rate steady except at
the very moment of adjustment.
Not only are the cost and ri.sk
of speculation on adjustment In
official rates small, but the profits
can be large. Exchange rates of the
currencies of large industrial countries are adjusted very infrequently, and, for that reason.' ~he
adjustments are highly publiclzed.
Partly because of the publicity,
devaluations tend to be substantial. And being substantial, ~he~
usually impact badly on natlOna h
.
t e
prestige. As though to convmce
public that the change was n.ecer
sary but also to leave a margm 0
safety, devaluing governm~nts are
apt to make large changes m par
values.
Critics of the Bretton Woods
system contend that bear speculation against a.weak currency can
actually force devaluation. The
bears win if they can exhaust the
official reserves or the willingnesS
of authorities to use reserves in
, continued pegging. The lower reserves fall, the more imminent the
possibility of a collapse of the
pegged rate-and the stronger the
motives for continued bear spec-
Ulation. Even if the rumors were
not true, the resulting speculation
could cause devaluation.
Speculators are rewarded at the
expense of taxpayers. In defending
a.n Overvalued currency, authorihes sell foreign exchange to speculators cheap, only to buy it back
at a higher price after the defense
~ollapses. The loss is even greater
~f sOme of the foreign exchange sold
In the futile pegging of home currency was borrowed abroad and
~ust,. therefore, be bought later at
e hIgher home-currency price to
repay foreign lenders.
-tends to increase the country's
deficit. Conversely, countries with
an export boom find their international reserves rising with the
increase in their foreign shipments,
and the result is an increase in
their money supply. A country's
monetary authority can offset the
expansionary tendencies transmitted through international
trade, but most actions the authorities are likely to take could perpetuate the disequilibrium in trade.
Under a fixed rate system, it is
argued, the transfer of influences of
differences in business cycles can
accentuate policy conflicts between
countries. One country, for example, may pursue domestic policies designed to stimulate demand
and relieve unemployment while
another, faced with problems of inflation and excess demand, pursues
policies designed to hold back
growth in spending.
A fixed rate system can also
transmit financial problems between countries, as has been seen
in flows of Eurodollars. A country
with rapid inflation faces rising
interest rates resulting from in-
as U.S. reserves trend downward
ve.stors demanding higher preInlums for the expected loss in the
purchasing power of their money.
A relative rise in interest rates
tends to attract interest-sensitive
capital from other countries. And
without offsetting action by stabilization authorities, the more inflationary country has an increase in
its money supply while the less inflationary country has a decrease
in its money supply. The rise in the
money stock in the more inflationary country contributes to increased spending and an intensification of inflationary pressures
conducive to even higher levels of
imports.
In defense of the Bretton Woods
system, it must be pointed out that
in the many payments crises during the period of rapidly expanding
trade since 1945, authorities have
been able to handle most adjustments under this system. Defenders of the system, while admitting
its imperfections, insist that
alternative systems-particularly
those offering more flexibilityhave even more defects. These
defenders believe adjustment
processes can be best served by reestablishing most of the essential
elements of the fixed exchange system as it emerged after the Bretton
Woods Conference.
IlILLION DOLLARS
(END-OF-MONTH FIGURES)
20 ___________________________________________
The free-floating system ....
.•• 'and still another
Another argument is that fixed ex~~ange rates allow fluctuations in
.e business cycle to be transnutted from one country to an°i~er, contributing to the transfer
o lIl1lation or recession between
COuntries.
A fairly high rate of inflation in
one country stimulates demand for
gOods and services from other
COUntries and-assuming no other
~omponent change in the importIng country's balance of payments
......
Germany gains international reserves
18 _
6
1----------.-----------,----1969
SOURCE: International Monetary Fund
.........
llns'
mess Review I September 1971
1970
1971
A completely flexible system would
be one under which exchange rates
were determined entirely in the
open market, without intervention
by 0fficial institutions. Ideally, an
exchange rate would relate directly
to the supply of a currency in the
market and the demand for it.
And changes in the exchange rate
would tend to restore balance to a
country's payments accounts by
inducing shifts in its imports and
exports.
Any tendency toward a surplus
or deficit in the country's balance
of payments would appear first as
changes in the exchange rate. A
developing surplus (resulting in
3
excess demand for the currency)
would cause the exchange rate to
rise, while a developing deficit
(resulting in an oversupply of the
currency) would cause the exchange rate to fall. These changes
in the supply and demand for a
particular currency would, in turn,
change the international movement of goods and services and the
flow of capital.
Proponents of free-floating rates
describe both universal and qualified systems. Under a universal
system, all countries would allow
the exchange rates of their currencies to be determined entirely
by the forces of demand and supply
in the foreign exchange markets.
Under a qualified system, most
countries would peg their currencies to the dollar or some other
major currency. Much international trade and finance, therefore,
would still be conducted under conditions of fixed rates.
Proponents of free rates say that
countries with heavy commitments
in foreign trade and close economic
ties to the United States would
link their currencies to the dollar.
Some important trading countries,
they say-such as Britain, France,
Germany, and Japan-might allow
their currencies to float free of the
dollar. One result could be the
establishment of at least two main
currency blocs-a dollar bloc and a
European bloc made up mostly of
Common Market countries but
Freed from fixed exchange rate,
value of Canadian dollar floats upward
U.s. DOLLAR
(AVERAGE DAILY RATES)
1.05
'51
'55
'59
'63
1971 figure for January-June only
SOURCE: Board of Governors, Federal Reserve System
'67
'71
possibly including the United
Kingdom.
Proponents also argue that free
rates could offer the world economy
several important advantages. One
is that each government would be
free to pursue domestic policies
without pressures to restrict international trade and payments for
balance-of-payments reasons.
Since the currencies of countries
with price stability tend to app~e
ciate relative to those of countrles
with inflationary tendencies, free
rates would allow each country to
pursue the combination of emplor
ment and price-trend objectives It
preferred.
Another advantage cited by its
proponents is that a system of free
rates reinforces the effectiveness
of monetary policy. For example,
interest rates normally rise in a
country fighting inflation with a
restrictive monetary policy, and
spending tends to be reduced. But
short-term capital flows into the
country, seeking the high interest
rates, and depresses the spot rate
for the currency-a movement that
can, in turn, cause a rise in imports
and a fall in exports. The increas.e
in imports tends to push domestlc
prices down or to depress incomes,
or both. The change in the trade
balance, therefore, reinforces the
purely domestic effects of higher
interest rates and helps moderate
inflationary pressures.
Proponents of free rates say that
with pegged spot rates, the increase
in domestic interest rates will not
directly induce an import surplus
and the tendency to reduce domestic prices and incomes. Restrictive
monetary conditions affect the
trade balance only insofar as they
reduce domestic prices or incomes,
or both.
If only a few blocs emerge under
the free-floating system-as in the
qualified system-the economic domains will be large and diversified.
As a result, changes in exchange
rates between flexible currencies
are apt to be slow, steady move-
,
(
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I
I
I
I
;
I
I
I
!!lents. This means, the argument
goes, that traders and investors
Would ordinarily be able to predict
the domestic value of their foreignc~rrency proceeds without much
dIfficulty.
. While a fluctuating system carr~es with it an exchange risk, this
Sk is also present under the
retton Woods system. Further~ore, opportunities for shedding
~lhSk are probably less costly under
e free-floating system.
The cost to a trader is the difference between the spot (current)
rate of exchange and the forward
(fQture) rate. A forward premium
~epresents the cost of protection to
~porters. To exporters due to recelV~ subsequent payments in
~OreIgn currencies, such a premium
~s nevertheless an advantage. This
because exporters realize more
f orne currency by selling exchange
orward than by selling it spot.
th For this reason-and also because
.ere may be a discount or pre~urn-the cost to traders of using
,orward exchange facilities could
J(~t as well be negative as positive.
• J. here is, of course, no presump~~on that profit or loss will fall ent lrely ?n only one party to an in1ernatIOnal transaction. A gain or
oss could be split between the two
Parties through its effect on the
priCing of the goods traded.)
It is argued, however, that the
costs of avoiding risk in floating
flchange markets are not usually
arge, negatively or positively, becruse forward and spot rates are
c Osely related. Both are free
!!larket rates, and commercial delnhands and supplies of forward exc ange partly match each other.
, Still another advantage of floatIng exchange rates is that they
gf reatly reduce the need for official
oreIgn exchange reserves. Under
'
fix.ed exchange system, official
1 reIgn exchange reserves are held
bargely to prevent fluctuations
eYond the narrow limits of the
par value of a currency. If the rate
IS not pegged, much of these official
B
h
fu
llUsiness Review I September 1971
foreign exchange reserves can be
used for domestic investment
purposes.
•.. and arguments against it •••
One of the major arguments
against floating exchange rates is
based on the fear that resistance to
inflation might be weakened under
such a system. Opponents of free
rates argue that the fight against
inflation is typically unpopular and
that governments tend to put off
the fight as long as possible. Fixed
exchange rates tend to prevent procrastination and overindulgence in
easy-money policies that could lead
to a balance-of-payments deficit, a
subsequent loss of reserves, and, if
continued, eventual devaluation.
With the threat of devaluation removed under a system of floating
rates, governments might pursue
inflationary policies more freely.
A second objection is that by increasing uncertainty, a system of
floating rates could reduce the
volume of international trade and
capital flow. The first aspect of this
argument is that floating exchange
rates could create additional risks,
tending to discourage international
trade. There is an established scale
of measurement under a fixed rate
system that free rates cannot offer.
Under free rates, no trader can
know enough about all the possible
developments that could affect the
rate of exchange between his country and his customer's country. As
a result, he will make contracts
that include a substantial allowance for the risk that the exchange
rate between the two currencies
mjght change before the transaction is completed. Prices in international trade and costs of doing
international business could become higher under free rates, and
the additional costs could reduce
trade flows.
Critics argue further that a freefloating system curtails long-term
foreign investment by increasing
risks. Either borrowers or lenders
would refuse to negotiate long-
term contracts if there were no
favored markets for them. A lender
can protect himself by insisting on
repayment and servicing in his own
currency, but this merely shifts to
the borrower the risk of unexpected gains or losses.
Another argument against free
rates is that speculation contributes to rate fluctuations. Speculators, interpreting a rise in the exchange rate (depreciation of a
currency) as a sign that the rate
will rise even more in the future
sell ~he depreciating currency, '
causmg even greater depreciation.
Such selling depresses the price of
the cur~ency n:o~e than underlying
econOmIC conditIOns may justify.
Some speculators, on the other
hand, realizing a currency is ex?essivel~ d~prec~ated, begin buying
It, causmg Its price to rise. This is
the signal for other speculators to
buy, and the price of the currency
soon rises above its level of longrun equilibrium.
There has been some experience
with free-floating rates. Canada,
for example, allowed its dollar to
float in the open market from 1950
to 1962. The Canadian dollar has
been floating again since May 1970
when the Canadian government '
announced that it would no longer
intervene in the market to keep the
country's exchange rate within 1
percent of the then-existing par
value of 92.5 U.S. cents. The Canadian experience, however, as
well as the experiences of other
countries that have allowed their
currencies to float, provides no conclusive indication of whether floating rates can be successfully implemented. These experiences have
involved only the rates of one
cUlTency or a few at the mosir-not
those of all the major currencies
simultaneously.
Wider bands
The wider band proposal would
retain exchange rates with a
pegged par value, but the fluctuations allowed around pegs would be
5
increased. Under this plan, the
margins of permissible variations
in exchange rates would be increased from the 1 percent on
either side of parity allowed under
the Bretton Woods system to,
say, 3 to 5 percent. This is similar
to the method used under the old
gold standard.
If a proposal were adopted requiring countries to maintain the
par value of their currencies within,
say, 5 percent, the most extreme
swing in the exchange rate allowed
between two currencies would be
20 percent. At one extreme, the
currency of one country could be
as much as 5 percent above par
while the currency of the other was
5 percent below par. At the other
extreme, currency of the first
country could be 5 percent below
par while the currency of the other
was 5 percent above.
The proposal offers two advantages. First, instead of an imbalance in the international accounts
going uncorrected for years-as it
has sometimes under the Bretton
Woods system-adjustment in the
accounts would be started automatically by rate movements
within the band affecting prices of
exports and imports.
Second, use of the wider band
approach would help moderate destabilizing flows of speculative
capital. The possibility of a wider
swing in exchange rates would put
pressure on speculators to help
authorities support a troubled
currency. When the value of a currency reached its lower support
point, there would be less possibility of a further fall in its par
value if the lower limit appeared
secure. But there would be a
greater possibility of a rise that
could be up to 10 percent, instead
of the 2 percent allowed under the
Articles of Agreement of the International Monetary Fund. If a
currency continued to appear unsupportable after a fall to the lower
support level, a speculative attack
could be expected.
6
currency would be changed continually at 2 percent a yearagain, provided all the changes
were in one direction.
One of the nondiscretionary
proposals suggests that parities
might be changed daily. Under
this proposal, parity would be calculated as the moving average of
the closing market value on 307
previous business days.
Two main advantages are
claimed for crawling or sliding
parities. First, because adjustments in exchange rates would
probably be very small, disequilibrating movements of capital
would be reduced to manageable
proportions. Second, because small
but frequent adjustments under
express conditions of disequilibrium would be allowed to continue beyond any predetermined
limit, balance-of-payments
problems would eventually be
corrected.
But there are also several arguments against the proposal for a
crawling peg. First, discretionary
proposals imply an assumption
that a developing disequilibrium
Crawling pegs
is visible to monetary authorities
(which may not be the case) and
Discretionary and nondiscretioncan be worked off in small instalary versions of the crawling peg
ments. Second, use of discretionarY
plan have been proposed. One of
the widely discussed discretionary plans would leave little doubt
about future changes in parities.
plans would allow authorities to
Regarding nondiscretionary plans,
adjust their parities as much as
there is the possibility that devel1/26 of a percent a week-or as
opments in parities would be
much as 2 percent over a year if
obvious to everyone. Also, because
all the adjustments were in ode
the formula for change would be
direction.
obtained from averages of previoUS
A similar proposal, called the
sliding parity, would allow authori- conditions, there is the possibility
that rates might be wrong for
ties to depreciate their currencies
current conditions. Third, both
as much as one-sixth of a percent
discretionary ~nd nondiscretionarY
in anyone month, provided they
plans fail to take into account
were faced with a continuing
changes in the equilibrium of
deficit in their balances of payexchange rates that come faster
ments. Conversely, authorities
than the maximum adjustment
faced with a continuing surplus
would appreciate their currency as , allowed.
much as one-sixth of a percent a
Fourth-and probably most
month. If an authority changed
important-such a system could
the par value of its currency every
limit the ability of authorities ~
month, the exchange value of the
use monetary policy for domestiC
A wider band arrangement
would offer a solution to a balanceof-payments problem, however,
only if exchange rates could vary
enough to adjust differences in
currencies created by diverging
national policies. Proponents of the
wider band recognize this as a serious limitation of their proposal.
If the band is not wide enough
to accommodate the swing and the
adjustment effects are too weak-or
if national policies continue to
diverge-exchange rates will stick at
their support points. Such a development would indicate that the
wider band did not offer enough
flexibility and that par values
would have to change. And in that
case, the system would be exposed
to all the weaknesses of a system
of fixed rates.
To cope with this possibility,
proposals have been made for small
but frequent changes in parity to
be substituted for the practice of
making large, discrete adjustments
of the peg. The system identified
with this proposal is called the
crawling peg.
(
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I
Purposes. If it became apparent
country's currency was considered its power to suggest changes in
that a currency was going to be
undervalued and the exchange rate the par values of currencies.
depreciated, the only way for the
was expected to continue bumping Under this proposal, the IMF
n;tonetary authority to prevent a
along the lower support limit for
would routinely review the
SIzable outflow of capital would
some time. A crawling peg system
balance-of-payments position of
would probably be more effective
~e to raise interest rates enough
each member country every two
o Overcome prospects for currency in keeping substantial disequilibmonths, not only recommending
appreciation abroad. And if the
rium from building up than it
changes but-after suitable interauthority's interest rate policy
would be in reducing disequilibvals-publishing its recommenWere determined by balance-ofdations.
rium that already exists.
PaYments considerations, policy
One objection to the plan in the
More frequent adjustments
C~anges would probably not coinIMF report is that circumstances
CIde exactly with those recomThe suggestion that parities be
for "appropriate" adjustments are
lllalended by domestic considerations adjusted more often is related to
too confining. Opponents of the
one.
plan believe that the concept of
the discretionary plans for a
There are important countercrawling peg-but with some impor- "fundamental disequilibrium"
hrguznents to these objections,
excludes many small imbalances
tant differences. The object of
OWever. One is that use of interest more frequent adjustments would that could be dealt with through
rates to control capital flows might be to eliminate unnecessary delays ~djustments in exchange rates. It
con,strain domestic monetary
IS more efficient, they say, to
in changing par values by encourPohcy no more under the crawling aging smaller but more frequent
correct payments imbalances by
g system than under the Bretton changes. This proposal is based on exchange rate adjustments than
fOOds system. In fact, proponents the belief that smaller adjustments through the imposition of direct
o the crawling peg believe that
controls-whether the imbalance is
would be more acceptable to
UCh constraints would be even
individual governments and would presumed to be temporary or
fundamental.
ess than under the Bretton Woods cause less shock to international
system. It should be easier, they
Anoth.er objection, perhaps the
financial markets than the large
say, to adjust domestic interest
most serIOUS, IS that this proposal
changes made under the Bretton
rates to
Woods system. Some adjustments does not solve the problem of the
c Pltal counteract fairly slow
.
outflows resulting from a
in par values have amounted to 10 proper determination of the size
and direction of frequent but
~ Ow downward crawl than to use
percent or more.
relatively small adjustments.
hem to counteract sudden sharp
A recent report by the Internaoutflows precipitated under a
tional Monetary Fund discussed a When authorities adjust the par
system of adjustable pegs.
values of their currencies, there
system that is typical of plans
.
IS no guarantee that the new
Another counterargument is that based on small but frequent
values will be consistent with
adjustments in par values. In line
~y monetary interdependence
market equilibrium. Market baletween countries created by a
with a long-standing practice,
craW ng peg could be reduced by
li
ance does not depend on the disexecutive directors of the IMF
sOme combination of the following- have recommended prompt adjust- cretion of authorities but on supply
and demand.
t' • Widening the band of fluctua- ments of parities in cases where a
country has a fundamental disIOn allowed in exchange rates
Temporary floating rates
equilibrium in its international
•. Officially financing private
capItal flows
It has been proposed that a Counpayments accounts. In the recent
report the directors considered an try or small group of countries
• Using selective measures to
redUce private capital flows
might allow exchange rates to float
amendment to the Articles of
Agreement that would allow m~m free in the market for a while.
bi All. these measures are compatiAlthough such a system would
ber countries to make changes ill
we. wlth the crawling peg. And
require revision of the Articles of
their parities without the fund's
hIle proponents of that system
Agreement-which are designed to
concurrence, provided the change
~ncede that selective measures
preserve established rates-there
did not exceed some set amountthstort the free flow of capital,
are signs of its developing outside
for example, 3 percent in any
ey point out that many such
formal agreements. Germany
12-month period or a cumulative
~easures have been used under
resorted to a temporary float in
10 percent in a five-year period.
e Bretton Woods system.
1969, and both Germany and the
A similar proposal from outside
A system of crawling pegs would
Netherlands began using such an
irobably constrain domestic mone- the IMF would enlarge the fund's
arrangement in May 1971. There
ary policy in situations where a
consulting function and increase
ev
i
i
llUsiness Review I September 1971
7
is widespread discussion about
whether or not the floating of the
U.S. dollar is temporary. Proposals
concerning temporary floating
exchange rates, therefore, are
merely to formalize institutional
arrangements already existing and
to extend these options to more
than just a few countries.
There is one important objection
to this plan, however-that temporary floating rates increase the
sense of financial uncertainty in
the countries involved and reduce
the flows of trade and capital.
There are reports, for example,
that with no established scale of
measurement during the current
float of the mark, German businessmen cannot be sure of their
costs and earnings in international
trade since they are having
trouble concluding forward contracts. If so, they could be inclined
to delay transactions as long as
their domestic currency floats.
There is also a subsidiary argument that by increasing the risks
of international trade, temporary
floats raise costs and reduce economic welfare.
One advantage of a temporary
float is that it allows a country to
use the floating rate when it sees
that a change is needed but is not
clear on the best size of change.
The market, then, can be used to
test the strength of pressures on
the currency and, in turn, indicate the appropriate new par value.
Another advantage is that if the
exchange rate floats gradually to
a new level, speculators are denied
a quick profit. Market pressures
help determine the proper par
value, helping avoid the likelihood
of another crisis in the near future.
Still another advantage is that
by allowing the exchange rate to
float for a while, monetary authorities can help avoid the buildup
of a crisis atmosphere. Prospect of
a major change in par value usually creates a sense of crisis.
massive speculative flows were
major factors leading to each
adjustm~nt.
Despite efforts to improve the
operation of the international
monetary system, the related problems of adjustment, confidence,
and liquidity remain. And while
it is still not clear what reforms
will be undertaken to deal with
these problems, the floating of
the U.S. dollar provides an opportunity for full consideration of
the major alternatives to the
Bretton Woods system.
-Lacy H. Hunt, II
A final observation
In the past five years, Britain and
France have devalued their currencies. Switzerland, Austria, and
Germany have revalued their
currencies upward. And German,
Dutch, and Canadian currencies
have floated. Even more significant, however, is the suspension
of convertibility between gold and
the U.S. dollar that set the dollar
and still more currencies afloat in
the international exchange market.
Conditions preceding all these
adjustments were chaotic, and
New par bank
The Huntwick Bank, Houston, Texas, an insured nonmember bank located in
the territory served by the Houston Branch of the Federal Reserve Bank of
Dallas, was added to the Par List on its opening date, August 18, 1971. The
officers are: Charles M. Friday, President; Laura Doerrie, Vice President; and
Joan Oster, Cashier.
8
--
!
Research Department
Federal Reserve Bank of Dallas
Station K, Dallas, Texas 75222
Federal Reserve Bank of Dallas
September 1971
Statistical Supplement to the Business Review
-
~redit at weekly reporting banks
~n the Eleventh District declined
ess than usual in the five weeks
~nded August 25, as a substantial
Increase in loans was more than
offset by a reduction in investlUents. Credit declined in spite of
a slight rise in deposits. Banks
used much of the deposit inflow to
sell Federal funds.
Almost three-fourths of the
Contraseasonal increase in loans
We~t to businesses, perhaps signaling some improvement in gen;ral economic activity. Real estate
.oans rose more than usual, reflectIng continued strength in con~truction activity. Consumer loans
In<:reased about in line with the
gaIns of comparable periods in
other recent years.
The reduction in bank invest~ert portfolios was substantial.
. 0 dings of U.S. Government
~hues declined considerably more
lU an usual, probably as banks
arketed securities acquired in
~ece!lt Treasury financings. The
t.ecline in holdings of other securiles Was contraseasonal.
d Deposits rose less than usual
inue.mainly to a slowing in the rise
A.. tlm~ an? savings deposits.
decline In demand deposits was
~raller than normal for this time
. Year. Large CD's outstanding
~creas~d less than usual, and
deh'{[ tIme and savings deposits
b c ned contraseasonally. On
re
~ance, reporting banks slightly
n uced their borrowings from
ondeposit sources.
~e)Cas replaced Iowa on July 1 as
f e nation's number one cattle
heeding state. With 1.7 million
1> ead on feed, Texas recorded a 26A..e~cent growth over a year before.
l'lzona and Oklahoma showed
year-to-year gains of 14 percent
and 17 percent, respectively. Inventories of cattle on feed in
Arizona and Texas declined, however, between July 1 and August 1.
The drop was due to heavy marketings and slower placements, as
drouth conditions moderated
and more heifers were held for
breeding.
Prices for most crops and cattle
continue strong. Although seasonal
factors tended to depress some
prices (and record production was
projected for many crops), most
prices on July 15 averaged higher
than a year earlier. Following a low
in the fourth quarter of 1970, gross
agricultural income improved
throughout the first half of this
year. Net income remained lower
than a year before, however, as
production costs advanced faster
than the prices farmers received.
Total nonagricultural wage and
salary employment in the five
southwestern states fell slightly in
July, interrupting a fairly slow
but continuous rise since January.
The movement is parallel to last
year's trend, although at a slightly
higher level. Employment in July
was 0.5 percent lower than in June
but 0.2 percent higher than in
July 1970.
Manufacturing and nonmanufacturing employment shared
about equally in the decline, falling 0.6 percent and 0.5 percent,
respectively. Manufacturing
employment-which had been
dropping fairly steadily since mid1969-leveled off in the first half
of this year but still showed no real
signs of improvement.
The slow rise in nonmanufacturing employment has kept total
nonfarm employment from falling
below levels of the last two years.
However, the JUly declines in mining, construction, and government
employment caused the first
monthly decrease in nonmanufacturing employment this year. Two
of these categories also showed
significant year-to-year declines:
mining fell 6.2 percent, and construction 3.2 percent. Government
employment was off 1.2 percent
from June, continuing its seasonal
drop, which is expected to bottom
out after school begins. Finance
and service employment showed
both month-to-month and year-toyear gains. Employment in trade
and in transportation and public
utilities was unchanged from June.
Registrations of new passenger
automobiles in Dallas, Fort Worth,
Houston, and San Antonio were 12
percent lower in July than in June.
Despite this decline, registrations
were 2 percent higher than in July
1970 and cumulative registrations
for the first seven months of 1971
were 10 percent greater than for
the same period a year earlier.
Department store sales in the
Eleventh District were 4 percent
higher in the four weeks ended
August 28 than in the corresponding period a year before.
Cumulative sales through that
date were 7 percent higher than a
year before.
Preliminary estimates indicate
that the seasonally adjusted Texas
industrial production index fell
slightly in July from its record
level in June. At 179.3 percent of
its 1957-59 base, the index was off
1.3 percent from the revised level
for June but was still 4.0 percent
(Continued on back page)
CONDITION STATISTICS OF WEEKLY REPORTING COMMERCIAL BANKS
Eleventh Federal Reserve District
(Thou san d dollars )
ASSt:TS
Aug . 25,
1971
July 21,
1971
Aug . 26,
1970
Federal funds sol d and securities pu rcha se d
under agreements to rese ll ..• ..............•
Oth er loan s and discounts, gross •• •.. .. . • .•..• • •
904,189
6,BB1,874
556,426
6,863,616
559,9B8
6,084,654
Comm ercial and industrial loan s. •. . ..••.• ... •
Ag ricultu ral loan s, excluding CCC
certiflcates of Interest • • • •• . . ••. ... .•.. . •••
loans to b rokers and d eal ers for
purchasing or carrying:
U.S. Govern ment securities ••• . . •••• ... . ••.•
Other securities . .• • ... ... .•. ...... • ..• . ••
Other loans for purcha sing or ca rrying:
U.S. Government securities ••• • •... .. .•.•• ..
Oth er securit ies •• . . . .••.. . ...••.•....••••
Loan s to nonbank flnancial in stitutions:
Sal es flnance, p ersonal flnance, factors,
and oth er business credit compani es • ... . . •
---3,164,288
---3,127,936
2,948,483
122,227
123,915
98,004
Total d oposits ..... .. .... . . .. ..... . . .. . ...... 10,929,399
----
July 21,
1971
10,914,638
Aug . 26,
1970
9,610,169
5814,53 1
3'956,351
'318,777
194,47 1
1,223,280
6,266,575
4,269,2 15
321,685
186,393
1,359,886
6,270,594
4,370,363r
295,204r
195,678
1,288,135
6,293
31,897
91,206
4,662,824
3,405
32,020
85,789
4,644,044
2,98 4
19,982
98,686
3,795,638
1,060,334
2,510,922
987,836
29,786
56,546
1,060,371
2,444,995
1,034,785
24,296
59,697
920,400
2027,3 05
'757,899
43,63 3
28,916
16,300
1,100
18,800
1,100
16,385
1,100
1,482,104
41,656
354, 183
13 2,556
21,589
1,065,295
1,386,283
64,59 1
320,805
131,554
21,342
1,057,385
I 009,003
'155,095
TOTAL liABILITIE RESERVES, AND
S,
CAPITAL ACCOUNTS .. . ................ 14,026,782
13,896,598
Total d emand de posits . . . . .. . ... . . .. .. .. .. . .
Ind ividuals, partn erships, and corporations . .. .
States and po litical subd ivision s . ...........
U.S. Gov ernm ent .. . ... .. .. ... .. ... .. .. ..
Banks In th e Unite d States •. . • • ••• • • • • .•• • .
Forelg nl
519
47,891
556
55,482
4,838
428,984
2,306
408,593
149,626
485,089
828,412
13,559
29,321
783,749
195,164
490,565
816,842
13,137
22,022
771,892
192,223
367,462
608,393
5,004
8,269
730,957
0
817,628
3,103,815
0
812,283
3,187,288
0
678,359
2,658,942
1,003,884
128,298
0
1,051, 110
132,960
0
901,258
73,224
0
----
Total U.S. Government securities .. • .•... .. •• ..
Trea sury bill s.. .• •• .. .. •• • ... • ••...... ••
Trea sury certlflcates of indebtedness •••• . • • •
Treasury notes and U.S. Government
bond s maturing'
Governments, ofAcial institutions, centra l
500
36,101
5,306
434,259
Other •• • •• ••••• • •••• • • •.•• •••• • •••• • · .
Rea l estate loans ....... •• ...... ••••... .. ... .
Loans to dom estic comm ercial banks•... .. ••• .. • •
Loans to foreign ban ks .• . •. .....•.••.•..•••• . .
Consum er in stalm ent loans •• ..... .. , .. .. . •• ••.•
Loans to foreign governments, offlcial
institutions, central banks, and international
in stitutions •. ...... .... .. ..• •. • ... .••• .. .
Oth er loans.•••. . •..... . • ... .•••.. .. ..••. •
Total investm ents . • • •.•. . . ... •••. . . ..• •. ..• • •
Aug . 25,
1971
LIABILITIES
135,982
602,817
136,787
194,807
577,905
145,438
185,977
547,700
94,357
49,768
1,895,453
63,663
1,845,143
80,653r
146,719r
1,256,149
975,402
93,394
483,967
8,955
110,152
72,956
1,061,005
919.234
96,277
491,418
8,540
470,912
471,401
13,896,598
12,351,111
States and political subdivisions .... . ... . .. .
U.S . Gov ernm ent (including posta I savings) •••.
Banks in th e Unite d States . . . ••.. ... ... ....
Foreig n:
Govern ments, offlcia l in stitution s centra l
,
banks, and international institution s.. •..•
Comm ercia l ban ks • .. .. . . .. ..... ... ... .
Fed era l funds purcha se d and securities sold
under agree ments to repurchase •• .......•....
Oth er liabilities for borrow ed money . . .... . .. .. •
Other liabilities . •.•. . ........... ... ...... ....
Reserve s on loans .... . . .. . .. ...•• •••...•.. . ••
Rese rves on securiti es •• .. . .. . ........ . . .. .. . ..
Total cap ital accounts ••••.• .•.•.•••..........
471,053
TOTAL ASSt:TS ..... ... . ... ............ 14,026,782
Certifle d and offlc ers' ch e cks, e tc . .. ... . ... . .
Tota l tim e and saving s de posits .. . •. . . . ........
Individuals, partn ership s, and corporations:
Saving s de posits ....... . ..... ....... . ..
Othe r tim e d e posits . .. ... ... . . ..... .. . .
----
419,71~
130,10
14,863
1 012,158
.-:--
-
~
35,884
1,538,692
15,810
138,900
1,170,977
981,346
96,403
408,938
8,328
bo nks, and intornational in stitutions . . . . . .
Commercial banks ..• .... . .. . .... . .....
Within 1 year .... . ............ . ...... .
1 year to 5 years••• • . •. . •••• .. .• • •••••
After 5 years • •• ••• • •••• • • •••• •• • •• •••
Obligations of states and political subdivisionsl
Tax warrants and short· term notes and bill s•••
All other • •• • • •••• • • •• .•• • ••• •• • ••••••••
Oth er bond s, corporate stocks, and securities:
Certlflcates representing participations in
Federal ag ency loan s. • •• • •... . •• . • •. ..
All other {including corporate stocks)• • • ••••••
Ca sh item s in process of coll ection ••••. . •• • •.. . ••
Reserves with federal Rese rve Bonk • •• . . ..... '. ' .
Curre ncy and coin • • .. . ... ••• • . ..• .. ... •••. . .
Balances with banks in the United Stat es • . • •.•• . .
Balances with bonks in foreign countri es •• . . •.••••
Oth er a sse ts (including investments in subsidiaries
r-Revlsed
CONDITION STATISTICS OF ALL MEMBER BANKS
Eleventh Federal Reserve District
(Million do ll ars)
-
July 29,
1970
Ju ly 28,
1971
June 30,
Balances with banks In foreign countri es e ••.•
Cash items in process of collection • . • . . .••• .
Other assetse . .. .. •. .... .. ......... .. ..
not consolidated) .. ... . . . . . .... .... .... .. ..
13,482
2,370
4,356
1,375
285
1,262
12
1,444
929
13,612
2,401
4,255
1,334
271
1,438
TOTAL ASSt:TS e ........ . . ........... .
25,515
25,887
~
=-
1,715
9,669
9,609
1,907
9,889
10,123
1,612
8,703
7,610
Total cap ital accounts e . . • . ... ...........
Other lIabilities e ..... ............. ... ...
20,993
1,544
1,098
1,880
21,919
1,536
563
1,869
TOTAL LI ABILITIES AND CAPITAL
ACCOUNTSe .. ........... ... ......
25,515
25,887
Item
ASSt:TS
loans and discounts, gross •.. .. ... •..•.. ..
U.S. Governm ent obligations•.•• .• . •......
Oth er securiti es .• . • . . ....•.... . ....•.•. .
Rese rves with Federal Reserve Bank •. • ... . .
Co sh in vault ••• .. . •.••.••......•.•... . .
r - Revised
Balances wUh banks In the Unite d States . • ••
RESERVE POSITIONS OF MEMBER BANKS
Demand d eposits of bonks •••• .. .. .. . ... .
Other d emand d e posits •.• •• ••••••..•• • ••
Time d eposits • .. ... ....• ... • ...........
(Averages of dally figures . Thousand dollars)
RESERVE CITY BANKS
Total rese rves held •••.. •.... . ••
With Fe deral Reserve Bank •• ..
Currency and coin .. •..... . •.
Requir ed reserves • •• . ••• . ..•• . •
Excess reserves • . .....•.•..• • • .
Borrowing s • . .. •• •.. . •.• . ...••
Free rese rves •• •• . ••• . ••••••••
COUNTRY BANKS
Total re se rves held .•• ... ... . .••
With Fe d eral Rese rve 8ank • •••
Curr en cy and coin • . . ... ••• . •
Re quired reserves •••• . . .. ••. . . •
Excess rese rves.• • . •.. . .. •... ••
Borrowing s • ...... •• .. •• .. . ...
Free reserves ••... .••....•.. . •
All MEMBER BANKS
Total reserves held ••.•.. .•..•..
With Fed ero l Reserve Bank • • • •
Currency and coin .• . ..• • . . ••
Re quire d reserves •• • . • ...•.....
~xces s reserves ••. .... . • .... •..
Borrowings • •..•• .. • . .. .• ...•.
Free reserves • •• . .. •• •. ••• .•••
11
1,570
995
LIABilITIES AND CAPITAL ACCOUNTS
Eleventh Federal Reserve District
Item
1971
4 weeks endod
Aug. 4,1971
5 weeks ended
July 7, 1971
5 weeks ended
Aug. 5, 1970
829,401
772,374
57,027
829,497
-96
29,411
-29,507
826,530
772,530
54,000
831 ,257
-4,727
8,908
-13,635
754,910
701,396
53,514
758,488
-3,578
88,192
-9 1,770
876,924
675,974
200,950
852,623
24,301
7,974
16,327
866,588
674,020
192,568
846,858
19,730
3,954
15,776
774,984
59 1,290
183,694
757,488
17,496
10,307
7,189
1,706,325
1,448,348
257,977
1,682,120
24,205
37,385
-13,180
1,693,118
1,446,550
246,568
1,678,115
15,003
12,862
2,14 1
1,529,894
1,292,686
237,208
1,515,976
13,918
98,499
-84,58 1
Total deposits•• • •... . ....... .. .......
Borrowing s . . ... . .... .... .. . . ... . ... .. .
11,903
2,017
3,356
1,220
270
1 ,1~~
=:=::::-1,215
621
17,925
1,218
860
1,793
~
e - Estimated
CONDITION OF THE FEDERAL RESERVI; BANK OF DALLAS
(Thousand dollars)
Item
Aug. 25,
1971
July 21,
1971
Discounts for member ban ks . • • • . . • • . . • • . . . .
Other discounts and advances .. . .... . . " . . • •
U.S. Govornment secu rities .... . . . • • . . •• . •. . .
Total ea rnin g a ssets.. .....................
Membor ban k reserve d oposits.... . ...... ...
Fed eral Reserve notes in actual circulation . ... .
4,000
0
2,959,804
2,963,804
1,561,886
2,076,952
80,598
0
3,056,498
3,137,096
1,584,807
2,076,682
Aug . 26,
~
-----------------------------------------------Total gold certiAcate roserves. . • . • . . • • • • . . • .
550,807
379,718
711,470
14,52~
8007
2,46 '527
2,48~'684
1,44 '252
1,831,
---------------------------------------------
BANK DEBITS, END-Of-MONTH DEPOSITS, AND DEPOSIT TURNOVER
SMSA' s in Eleventh Federal Reserve District
(Dolla r
amo unl s In Ihou sand s, seasonally adl uslad)
-
DE81TS TO DEMAND DEPOSIT ACCOUNTS'
DEMAND DEPOSITS'
Percent chang e
Annual rate
July 1971 from
of turnover
July
1971
7 month ••
u'Y
Standard metropolitan
(Annual.rate
lJ9u7ne
i
IJ97 O
197917fOrom
1
Jul y 31,
Jul y
June
July
_____
~~~-------.~a~ ~ , ~r a~------------------~
t ti~.t~ic a~ a ~e~
b~a~.,~.)--_______________________________________7_1
19 _________1~ 7_______~1~9:7:______~1~9~7~___
9~ 1
1
0
tRIZONA: Tuc.on.
OUISIANA:Monra~:::::::::::::::::::::::::::::::::
NEW
Shreveport........... .. ...... . .... ... ...
TEX MEXICO: Ra.well ' ... ...........................
AS: Abilene........
::;:~i~i~I~::: :: : ::::::::::::::::::::::::::::::
8~~:mo~,I·PHrt
trthur·rrange..... ....... .... ...
$
7,727.724
3,374.376
11.013,948
1,018,560
2,233,692
5%
4
-7
5
-I
-1
I&m;m
6.832.;6~
13%
17
22
15
4
2g
-1 ~
-11
~f:~~;t~': ':~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ 1
:~:m:m ~~~
H~u:t~'~~~:~~~~'
1I~·m·6g~
~~;~~~:~~r;.t.i~~~~:.~~.8.e.n:t.o:::: :::::::::::::
~:m:1h
City.. ... . .. . ...... . ... .. . . .•.
~bi,~~k :::::: :::: ::::::::::::::::::::::::::
M~~~~~·~~~:r.-~~~n.b.ur?..... . .... . . .. . ....... .
1:~6~)~!
=~
g~~.~~g
-~
f~1:~[~~t~LL.:~~<;;;;;;;<;;;;«< 2mrm -~~
_~~
~'m'm
~~h~t~·F~li.:.:.:::::::::: :::: :::::: ::::::::::: ~:m:m
I~
T;~~:~~~~ .(Texa •. Arkan.a.) . ... ,'. .... .... .... ..
Totol 2 centers . .................... . ............ .
~
$391.994.088
-1%
21%
19
17
5
8
$269,677
101,506
268.650
43.482
108,839
1~
1~
2~
if
~
l~
~
~
j~
Ig
9%
~t~
~~:~
26.8
25.9
~~:~
2~J:m
~~
27.0
35.0
43.6
24.5
21.3
~~:~
J~~;:;~
1:
2:
28.0
34.6
40.6
24.2
20.9
2~~:~~~
n~
If
2J1~:~~t
I~
m:6g~
l~:!
li~:m
~
1~
12%
~~:~
~ig~!
I&~:m
m;m
1!
~~:~
~g:i
~g:~
~t~
l~:~
iU
~U
2'm:m
H:~
290
33:0
36.9
23.5
21.1
g:~
~~:6
~n
~H
iH
~~:r
~H
~~:i
~U
~~:g
~~:~
38.9
39.3
40.1
m
$10.038.465
~~:~
' De
' CoPUOSlts of Individuals. partnerships and corporations and of slales and political subdivisi ons
•
nly basis
INDUSTRIAL PRODUCTION
(Seasona lly adjusled Indexes)
July
1971p
Aroa and type of index
BUILDING PERMITS
TEXAS (1957-59 = 100)
......
Totcl industria l production . •.•••
VALUATION (Dollar amounts In thou.and.)
Percent change
July 1971
from
NUM8ER
~a
July
1971
Jul y
1971
7 mos.
1971
7 mos.
June
1971
1971
5.168
58,117
-53%
-73
16
7 months,
July
1970
1971 from
1970
lOIJISIAN~"' " •
440
4.764
$
43%
70
515
717
3.744
697
6.483
12.234
35.335
58
157
504
163
128
CO
e . ...
Dal,Pu • Christi •.
755
Denl~~~"'" •• 1.855
EI P • ..•.. .
42
514
Fortaw······ .
Gal orth . . ..
427
55
liou;t~s~on ••••.
Laredo .. ... .. 3.805
54
lubb .•... ..
Midl~~~ "'" . 168
64
Odessa··· ·· .
65
Port A •• ... ..
56
San A~thur • ...
So A gelo .. ••
73
Sh~rm~~onio •• • 2.034
36
~.arka~;: : : :
25
aco
333
Wichit~ ' F~,i;.::
79
TotO I_26 "
----~,,, •• •• • 12.475
369
986
3.660
1.121
722
5.952
13.267
247
3.473
2.975
493
26.822
358
1.476
490
607
500
475
11.358
422
284
2.069
565
729
2.86 1
14.117
4.561
1.286
4.081
20.524
307
7.2 19
8.199
666
47.966
73 1
3.749
500
563
439
2.351
10.876
261
439
1.560
1.513
7.525
17.157
91.535
10.813
4.496
37.989
163,507
2.096
67.8 84
74.1 11
8.232
393.643
5.437
48.974
7.460
4.794
3.658
7.999
72.280
3.961
6.081
16.242
12,704
Ab"ene
A"'arill; · · · ·· .
Austin . .. .. .
Beaurr;o'nt' . ...
BrOwnsvil/ ' ... .
87.916
----
------
$ 147,846 $1.174.264
-72
87
23
77
-74 -73
224
96
-7 _ 15
613
188
179
242
79
-21
-34
-8
3
241
11
-33
83
-49
39
35
45
-42
269
5
_71 _46
-4
-30
-4
-9
121
40
-2
105
35
-23
29 -91
_26
254
-46 - 19
86 -29
16
-25
26
68
48
120
-25
-24
27
43
113
51
24
47
157
-23
-44
-3
23
-61
15
-36
56
-30%
Total industria l production ......
Manufacturing ...... ... ....... .
Durable ••. .••...•••••. .. •..•
Nondurable • ..• • .• ••• .. .... .•
9%
May
1971
July
1970
179.3
196.9
194.7
198.3
134.5
289.9
181.7
199.6
197.2
201.2
136.6
289.9
180.8r
196.7r
197.4
196.3r
138.6r
289.9r
172.5r
193.8
204.1 r
I 86.9r
125.8r
260.7
106.0
104.6
99.8
113.0
105.1
134.0
106.9
105.2
99.8
113.3
108.6
133.2
107.0
105.5
100.4
112.9
108.6
132.1
107.5
106.9
103.7
111.6
106.5
130.2
June
98%
Monroe. Wes t
Sh Monroe • .. ..
revep t
TeXAS
Or . ...
Utllltie •••.. ..... .........•.•..
UNITED STATES (1967 = 100j
Mining •••..••....•.......• • . · •
U"""e •• . .. .. •... ..• . ··· · ···· .
ARIZONA
TUcson
Manufacturing .. .. .. ...... . ... .
Durable • . ••• •• •. •.••. . ••. • ••
Nondurable • .•••. •••• •••• .••.
Mining . ... . . .............. ·.· .
1971
24%
p - Preliminary
r - Revised
SOURCES: Board of Governors of Ihe Federal Reserve System
Federal Reserve Bank of Dallas
GROSS DEMAND AND TIME DEPOSITS OF MEMBER BANKS
Eleventh Federal Reserve D istrict
(A verages of dally figures . Million dollars)
GROSS DEMAND DEPOSITS
Date
Total
city bank.
Country
bonks
1969: July •. .....
1970: Jul y•......
1971 : February •••
March .. .. .
April . ....•
May ......
10,316
10.412
11 .272
11.219
11.555
11.348
11.354
11 .507
4.783
4.782
5. 11 8
5.117
5.274
5.216
5.224
5.3 14
5.533
5.630
6.154
6.102
6.281
6.132
6.130
6.193
Reservo
Jun e . . ... .
July .... . ..
TIME DEPOSITS
Reserve
Total
city bank.
Country
bank.
7.474
7,5 1 I
9.299
9.548
9.575
9.516
9.573
9.588
2.806
2.722
3.689
3.788
3.736
3.688
3.691
3.696
4.668
4.789
5.610
5.760
5.839
5.828
5.882
5.892
VALUE OF CONSTRUCTION CONTRACTS
NONAGRICULTURAL EMPLOYMENT
(Million dollars)
Five Southwestern States'
-
Percent change
January-July
Area and type
FIVE SOUTHWESTERN
STATES! • •..............
Re sid ential build ing .. .. ...
Nonr esid ential building •• . •
NonbuJlding construction . ...
UNITED STATES . ....... . ...
Res id ential building . .... . .
Nonresid ential building .••.
Nonbuilding construction . .•.
July
1971
May
1971
June
1971
1971
922
464
276
182
8,077
3,485
2,800
1,792
713
387
193
134
7,555
3,3 10
2,264
1,981
5,283
2,603
1,658
1,022
46,601
19,491
15,248
11,863
..:.:.::..-July
1970
Typo of employment
932
445
236
250
7,670
3,357
2,621
1,691
July 1971 from
Number of persons
4,725r
1,71 Or
1,508
1,507
40,790r
14,01 1r
14,932r
11,847r
Total nonagricultural
wage and salary workers . •
Manufacturing . • • • •. • .•.•
Nonmonufacturing ..• . • • ••
Mining •••.••.•..... . . .
Construction . • . ... . ... .
July
1971p
1971
July
1970r
6,315,100
1,119,700
5,195,400
221,500
388,300
6,346,000
1,125,900
5,220,100
232,900
391,100
6,300,400
1,169,700
5,130,700
236,200
401,000
452,700
1,490,100
334,800
1,035,500
1,272,500
452,700
1,490,100
332,900
1,033,000
1,287,400
457,300
1,461,100
324,800
1,0 16,900
1,233,400
June
Juno
1971
Transportation and
public utilities • . . .... .
• Arizona, louisiana, New Mexico, Oklahoma, and Texas
r - Re vised
NOTE . - Details may not add to totals because of rounding.
SOURCE: F. W. Dodge, McGraw-Hili, Inc.
Trade • . • .• . ..........
Finance .. . •• . • • .... •• .
Service . • . . . • . . . .. .. . .
Government •••• • • •••••
1970
-0.5% 0.2%
_.6 _4.3
1.3
_.5
-4.9 _6.2
_3.2
-.7
.0 _1.0
2.0
.0
3.1
.6
1.8%
.2
-1.2% 3.2
-
Arizona, louisiana, New Mexico, Oklahoma, and Texas
p - Preliminary
r - Revised
SOURCE: State employment agencIes
1
CROP PRODUCTION
(Thousand bushels)
TEXAS
FIVE SOUTHWESTERN STATES'
1971,
1971,
(Thousand barrels)
estimated
estimated
DAILY AVERAGE PRODUCTION OF CRUDE OIL
Crop
Aug. 1
1970
1969
Aug. 1
1970
1969
Colton 2 • ••••••• •
Corn ••.. . ... . . •
3,306
33,120
31,416
5,994
1,320
378
22,416
306,050
70
3,080
417,150
3,939
630
3,217
32,391
54,408
29,032
4,224
566
20,782
329,616
1,125
4,037
429,930
4,593
1,040
2,862
25,124
68,856
25,460
3,290
684
21,646
309,800
1,300
3,451
389,070
4,437
780
4,881
44,316
115,014
11 ,466
22,784
1,158
42,813
368,468
70
8,897
638,300
7,301
4,030
4,561
43,554
169,437
38,304
33,954
1,502
41,179
386,051
1,125
9,811
640,196
8,075
5,205
4,409
34,266
196,824
33,058
29,096
1,664
42,115
368,740
1,300
9,119
610,549
8,084
5,200
Percent
Winter wheat • • . •
Oats . •. . . .... . .
Barley • •.....•..
Rye •• •. • .......
Rice 3 •••••• •• • ••
Sorghum groin • . •
Flaxseed ... . . . ..
Hay' ...... . .•..
Peanutsli ••• • •• ••
Irish potatoes 6 • •••
Sweet potatoeso ..
Area
FOUR SOUTHWESTERN
STATES ...•. .. ....•... ••
Louisiana ••• • •. •••.. • ••• •
New Mexico . •.•. • .•.•••.
Oklahoma • . • . ...... . ..•.
Texas . . ... . . .. . . .. . ... .
Gulf Coast . . •. •.• .. • ..
West Texas ..•... . . .. .
Ea st Texas (proper) • .. ..
Panhand le . •••• .• .• • .••
1 Arizona, louisiana, New MexiCO, Oklahoma, and Texas
" Thousand bal es
a Thousand bags containing 100 pounds each
• Thousand tons
• Thousand pounds
o Thousand hundredweight
SOURCE : U.S . Department of Agriculture
higher than in July 1970. All sectors shared in the drop except utilities, which remained unchanged.
Durable goods manufacturing
was off 1.2 percent from a month
before and 4.6 percent from a year
before. The only industry group in
durable goods showing a significant increase over the previous
month was that producing lumber
and wood products. Output of that
group rose 1.3 percent. Production
of transportation equipment was
essentially unchanged. Output of
all other durables declined slightly.
In nondurable manufacturing,
textile mills showed the only significant gain, an advance of 2.4
percent over the June level. The
only other changes in nondurable
production were declines. The
Rest of state .• ...•.. . •.
UNITED STATES • •.•••••.. . .
July
1971
1971
July
1970
6,888.8
2,557.0
336.2
601.6
3,394.0
696.0
1,609.0
226.0
72.0
791 .0
9,628.3
6,989.9
2,592.6
339.0
606.0
3,452.3
704.3
1,641.5
226.8
67.8
81 1.9
9,731.6
6,435.3,
2,336.2,
345.8r
620.5,
3,132.8r
614.2r
1,530.7
159.7r
76.6r
751.6r
9,191.9
June
-
chang~
June
1971
-1.5%
- 1.4
-.8
- .7
- 1.7
-1.2
-2.0
_.4
6.2
-2.6
-1.1%
July
1970
7.0%
9.5
_2.8
_3.1
8.3
13.3
5.1
41.5
_6.0
U%
.-
r - Revised
SOURCES: American Petroleum Institute
U.S. Bureau of Mines
Federal Reserve Bank of Dallas
largest was in food products, which
fell 4.4 percent.
Compared with a year earlier,
textiles, paper, and leather products were the weakest nondurable
industry groups, posting declines
of 10.7 percent, 5.S percent, and
14,2 percent, respectively. Petroleum refining was the strongest
industry, showing a 21.S-percent
increase over a year before.
Because of the continued decline
in production of crude petroleum,
mining fell 1.5 percent in July but
still showed a gain of 7.0 percent
over the July 1970 level.
Oil allowables for both Texas and
Louisiana have been cut for September. This was the fifth consecutive monthly drop for Texas. The
fall from 66.2 percent of maximuIn
efficient production for August t o
65.1 percent for September was
due to excessive stocks and slow
crude sales. Louisiana's cut, froIn
75 percent allowed since November
to 73 percent, was due to reduced
demand.
New Mexico will continue its
rate at a daily average of 70 barrels per well for its southeastern
fields and 100 barrels per well for
its northwestern .fields. These rateS
will hold through October. The d
flow rate in southeastern fields ha
been set at SO barrels a day in
May and June but was cut back to
prevent waste of gas produced
along with the oil-a problem that
remains a factor in keeping production at the 70-barrel figure,
@FedFRASER